This best practice highlights the positive incentive measures that the government of China has designed and is implementing to encourage the achievement of biodiversity-friendly outcomes. It also highlights the steps that the government is taking to eliminate perverse incentives and subsidies which are harmful to biodiversity.

To achieve its national biodiversity target on promoting positive incentives, while eliminating negative incentive measures for biodiversity conservation, China has:

Eliminated rebates for export of 553 products with high energy and resource consumption;

Established guarantee funds, which require mining operators to deposit funds for ecological recovery in mining areas;

This best practice has been repurposed from China’s Fifth National Report to CBD (5NR), and China’s National Biodiversity Strategy and Action Plan (NBSAP) 2011-2020.

Problem, challenge or context:

Certain public policies, measures or practices voluntarily or involuntarily, encourage behaviors that are harmful for biodiversity. According to the CBD Secretariat, such policy failures may include government subsidies, laws or customary practices governing resource use, which fail to account for environmental externalities.

Specific elements of components:

The Convention on Biological Diversity (CBD) Article 11, on incentive measures, creates an obligation for Parties to, “as far as possible and as appropriate, adopt economically and socially sound measures that act as incentives for the conservation and sustainable use of biological diversity.” The CBD Conference of the Parties (CoP), at its sixth meeting in 2001, adopted a programme of work on incentive measures, and the issue has been firmly on the agenda of CoP since then. Additionally, the Strategic Plan for Biodiversity 2011-2020 and Aichi Biodiversity Target (ABT) Three aim to reform, eliminate or reduce harmful incentives and subsidies by 2020.

Despite the measures taken by the government of China to conserve biodiversity, the trend is still declining. To combat biodiversity loss, China is using incentive mechanisms to promote biodiversity conservation and ecosystem services.

China’s NBSAP 2011-2020 includes a key National Biodiversity Target that promotes positive incentive measures to conserve biodiversity, and seeks to:

Establish mechanisms for ecological compensation;

Increase fiscal transfers to key ecological function zones;

Conduct studies on the establishment of national specialized funds for ecological compensation; and

Promote the system of reserves for sustainable development of resource-efficient enterprises.

The action taken:

In order to ensure the conservation of biodiversity and the sustainable use of its components, it is important to not only identify policies and practices which generate harmful incentives, but also to promote positive measures which incentivize biodiversity-friendly behavior. China has heavily invested in eliminating harmful subsidies that negatively impact biodiversity, and has undertaken several successful positive incentive measures which incentivize biodiversity-friendly behavior. Key actions include:

2. Establishing guarantee funds for ecological restoration of the mining sector. In 2006, China developed guidance for the mining sector, which required companies to provide guarantee funds out of their product sales income, for ecological restoration and environmental improvement. So far, 30 provinces (autonomous regions, province-level municipalities) have established such funds. By the end of 2014, 86.76 per cent of the mines paid their guarantee funds totaling 86.774 billion yuan RMB (Chinese currency), and accounted for 40.02 per cent of the total funds that should be paid.

3. Subsidizing the return of cultivated land to forests, and of grazing land to grasslands. Since 1999, the central government has cumulatively invested 405.66 billion yuan RMB (2015) in subsidizing households that have returned their cultivated land to forests, benefiting 124 million farmers. Subsidies have also been provided to herdsmen who returned their grazing land to grassland, along with technical capacity building opportunities to successfully adjust to new way of life. During 2003-2016, the central government invested 20.9 billion yuan RMB, benefiting 181 counties, more than 900,000 farm households and more than 4.5 million farmers and herdsmen (in eight provinces).

4. Subsidizing projects on natural forest protection. The Government, through natural forest protection projects, has provided subsidies for forest management and conservation, seedling cultivation and reforestation. During Phase I of the project, the government invested 118.6 billion yuan RMB. At the end of 2010, the State Council decided to implement Phase II of the project, which aims to invest about 244 billion yuan RMB from 2011 to 2020.

5. Subsidizing wetland conservation. Since 2006, the government has provided fiscal subsidies for wetland conservation. As a result of these subsidies, more than 500 wetlands have been protected and restored, with an area of over 3,000 km sq. of protected wetlands added annually.

6. Establishing funds for compensating forest ecological benefits. In 2004, the Forest Ecological Benefits Compensation Fund was established to subsidize plantation, and conservation and management of forests for ecological benefits. By 2016, a total of 115.09 billion yuan RMB was disbursed by the central government to various local governments, as subsidies for public benefit forests, for an area of 924,000 Km Sq.

7. Establishing an ecological compensation fund for key ecological function zones. The central government has set up a specialized fund to support key ecological function zones. By 2017, approximately 62.7 billion yuan RMB, have been transferred to 819 counties consisting of key ecological function zones.

Key lessons learned:

The reform of perverse incentives has the potential to make a critical contribution to reducing current rates of biodiversity loss.

Removing or mitigating perverse incentives can make positive incentives more effective, and can even reduce the need for providing positive incentives.

A strong government leadership, combined with a well-managed process, is necessary for lasting reforms.

Incentivizing and empowering local communities in natural resource management can generate awareness, and a sense of responsibility, resulting in positive impacts on natural resource use.

Securing long-term financial sustainability of positive incentives is critical, since positive effects on biodiversity will require time to take effect and since maintaining these positive effects requires the continuation of policies that encourage environmentally sustainable behavior.

Impacts and outcomes:

According to CBD’s evaluation entitled “Analysis of Targets Established by Parties and Progress Towards the Aichi Biodiversity Targets” (https://goo.gl/dFup59), China has made good progress in implementing its NBSAP 2011-2030 national biodiversity target geared towards the elimination of perverse incentives, and the introduction of positive incentive measures to promote biodiversity conservation and sustainable use.